LNG bunkers promising option among many alternatives: industry experts


LNG as a marine fuel presents a viable and immediate solution to expedite decarbonization as shipping explores other options like biofuels, ammonia and methanol to meet stricter environmental regulations, experts said at an industry event.

“For many alternatives, we have not done life cycle analysis and that adds a tremendous amount of uncertainty … What is [future] regulation going to look like? That’s why we’re seeing an emphasis on LNG right now,” Peter Keller, chairman SEA-LNG, said at the virtual Ship Energy Summit 2021 organized by Petrospot Sept. 7-8.
The LNG bunker market is poised for maturity, with many shipowners mulling or undertaking forward long-term contracts in this space, Keller said.

This year has seen a flurry of new LNG dual-fuel ship construction contracts, and the trend is expected to continue as shipping progresses toward net-zero.

LNG-fueled ship orders are approaching 30% of gross tonnage on order, representing a substantial part of shipping’s overall capacity when these are delivered, SEA-LNG said in a statement Sept. 7 citing Clarkson Research Services, adding that it is anticipated that more than 90% of the new Pure Car and Truck Carriers that will enter the market in the coming years will be LNG dual fuel.

Likewise, containership owners and operators are moving to LNG-fueled tonnage, with orders for LNG-fueled liners increasing fivefold since January 2020. Tankers and bulkers are also following suit, with increases of sevenfold and twofold, respectively, over the 18-month period, SEA-LNG added.

“LNG has had a long history in cargo trading. I think LNG is the most viable choice today along with biofuels,” Nacho de Miguel, head of business development, Peninsula Petroleum, said at the same event. The company launched its LNG bunkering business in February.

“We are fortunate to have deep relationships with many customers, either already operating LNG-powered vessels, or in the final stages of delivering new ships for service. Building our LNG proposition around customer needs is a natural progression for us,” Victor Morales, Peninsula’s global head of sales & marketing, had said in a statement that month.

Other alternatives

“When we go to other alternative fuels, we see a lot of interest in methanol but question who would supply,” said Dag Lilletvedt, CEO and founder of Powerzeek, a company that provides a fuel digital platform.

For biofuels, shipowners are interested but there is a lot of uncertainty shrouding its widespread adoption, he said.

“It’s more like a bilateral market that is not very transparent and [then] there is also a question — how do you make that biofuel,” Lilletvedt said.

Then are other hurdles around many alternative fuels, such as developing a supply chain, getting the product to ship, and training seafarers around their uses, Keller said.

But as far as LNG was concerned, the infrastructure is readily available globally, said Christoffer Berg Lassen, COO at Bunker Holding.

“We can take it [LNG bunkers] in the same tank, same ships and we can burn it in the same engine. And that’s a challenge for methanol and ammonia,” he said.

Chris Chatterton, COO of the Methanol Institute, told S&P Global Platts separately in a recent interview that methanol is set to play a “sizable role” in the global bunker fuel mix by 2050, but its short-medium term prospects had also received a boost after A.P. Moller-Maersk announced plans to have eight large ocean-going containerships capable of being operated on carbon-neutral methanol.

When asked how hydrogen and ammonia stacked up versus methanol as zero carbon fuel options, Chatterton said both hydrogen and ammonia are zero-carbon fuels on a tank-to-wake basis, but are actually more carbon intensive than methanol on a well-to-wake, unless produced through a green platform such as renewably powered electrolysis.

Additionally, on a net greenhouse gas or CO2 equivalent basis, methanol performs better than hydrogen or ammonia. Methanol is a superior carrier of hydrogen than hydrogen itself in either gas or liquid form, he said.

However, to provide impetus to methanol as a marine fuel, there is a need to push policy that fully supports decarbonization as ships are already on the water with more being ordered, Chatterton added.

In the end, the transition to alternative fuels is a good opportunity to make the market more transparent, Berg Lassen said.

When prices rise for alternative fuels, the need to secure more information from clients will also increase, facilitating more transparency in the industry, he said.

With the new fuels, clients will likely be more interested to enter contracts rather than rely on the spot market. So, there will be more liquidity in the market and for the same purpose, continuous bank support is required, he added.

Source: Platts